Freddie Mac's CFO's pay package sends the wrong message
byOct 2nd 2009 6:00PM
The truth is that as Treasury Secretary, Geithner makes $191,300 a year. And while there's no doubt plenty of perks, there was no signing bonus or the ridiculous sounding "additional annual salary."
Yet another government employee – more or less – who has a lot less power than Geithner, is getting paid 3.5 times as much. That employee is being handed a $1.95 million signing bonus and has the opportunity to earn another $1.6 million in so-called additional annual salary, according to a contract filed recently with the Securities and Exchange Commission.
Meet Ross J. Kari, the newly hired CFO of Freddie Mac. As some people might recall, Freddie Mac was bailed out by the federal government – that's taxpayers like you and me – last September at the height of the financial crisis. Since then, the government has spent just over $51 billion propping Freddie Mac up, giving it about an 80 percent stake in the company.
Granted Freddie Mac stock trades publicly so it's not exactly the same thing as the Treasury Department. And while that stock is currently trading under $2 a share, that's still a lot better than the 36 cents it was trading at back in March. Still, it's a far cry from the over $60 a share it was trading just two years ago. Back then, few people questioned the hefty salaries and perks that top of executives at Freddie Mac or Fannie Mae, another publicly traded quasi-government entity, made.
But given the hefty government infusion, it seems more than fair to ask what exactly Freddie (and by extension, American taxpayers) are paying for. Doug Duvall, a Freddie Mac spokesman declined to comment beyond the SEC filing, although he did note that the Federal Housing Finance Agency (FHFA), which regulates Freddie Mac, approved the contract. A statement released by FHFA last week said that "Freddie Mac hired Mr. Kari for a critical job at a critical time in our nation's economy and for the company.
Freddie Mac had been searching for a new chief financial officer for more than one year. FHFA approved the compensation after consultation with the Treasury Department, as Mr. Kari is well-qualified for the position and the amount is comparable to market pay."
Now perhaps Kari, the former CFO of First Third Bancorp for the past 10 months and before that the CFO of insurance giant Safeco, will prove to be worth the money. After all, there's no doubt that Freddie Mac needs help. Still, even if Kari turns out to be a Superhero CFO, there's only so much one man can really do and his compensation here clearly sends the wrong message that Freddie Mac is headed back.
Michelle Leder is the editor of footnoted.org which looks at the things companies bury in their routine SEC filings.